Overstock.com

About Overstock.com

Overstock.com allows you to shop a Persian bazaar of clothes, housewares, music, books, and more. The online discount retailer hawks brand-name merchandise, including furniture, electronics, jewelry, travel, and insurance. Most of its inventory comes from manufacturers stuck with overproduction, older models, or some color that wasn't as popular as – more...the designer had envisioned. The company's products portfolio includes brands Bissell, Hewlett-Packard, Movado, and Steve Madden, among others. In addition to its main website, Overstock.com manages an online auction site and provides car and real estate listings. The retailer's Club O loyalty program offers discounts to members on selected items and shipping.

Operations

The online discount retailer has two operating segments: Direct and Fulfillment. The direct business (16% of sales) sells merchandise to individual consumers and businesses. The larger Fulfillment partner business (84% of sales) sells merchandise for other retailers and manufacturers from the Overstock.com website. The company acts as a host for some 2,000 third parties who supply about 242,000 products.

Geographic Reach

While Overstock.com has no operations outside the US, it began selling products to customers in more than 100 countries outside the country from its website in mid-2008.

Financial Analysis

Overstock.com's sales dipped by about 3% in 2011 vs. 2010, and the company was unprofitable. (Indeed, Overstock.com has failed to turn a profit in eight of the last 10 years.) While revenue from its larger fulfillment partner business segment inched up by about 1%, the direct business saw sales decline 22%. The company blamed the double-digit drop in direct sales on a transition of some of its clothing and shoes category to a fulfillment partner model. The poor financial performance in 2011 followed a banner year in 2010 when Overstock.com's revenue jumped 24% vs. 2009, driven by pricing and marketing efforts that lured new customers to its website and helped to boost the average order size.

Strategy

Over the years, Overstock.com has evolved from an online seller of discount merchandise to an operator of multiple websites that list cars and real estate for sale, host online auctions, and provides other specialized services. In 2010 the firm launched Eziba.com, a private sale website where members shop for exclusive deals on home decor, furniture, jewelry, and more. In 2009 its O.biz website began offering bulk and business related items. After selling its travel subsidiary at a loss to Castles Travel in 2009 -- following the downturn in the travel industry -- Overstock.com in 2011 is once again offering vacations.

Given Overstock.com's failure to turn a profit in eight of the past 10 years, an ongoing investigation by the Securities and Exchange Commission following the discovery that the company violated various accounting rules, and losses related to failed litigation by the company, Overstock.com's shares have been battered.

Ownership

Chairman and CEO Patrick Byrne, who started the company with former president Jason Lindsey, owns about 29% of Overstock.com through his control of High Plains Investments LLC and personal holdings. In addition, Fairfax Financial Holdings owns about 14% of the company, as does Francis Chou, a Canadian fund manager. – less